Alphabet Soup: ACOs under ACA

We've long been familiar with CHIP and FMAP, while health reform has given us PPACA (ACA for short) and CLASS.  You've probably also heard a lot recently about ACOs--Accountable Care Organizations which may be the concept of the year for many of our friends in the physician, hospital, and insurance communities.  (Atul Gawande wrote in the New Yorker about organizations that have inspired them.)  So should advocates for kids and families add yet another acronym to their lexicons?  Probably so, since the Affordable Care Act moves the health care industry toward ACOs in a big way, and kids in Medicaid will be among the first to encounter them.

Accountable care organizations are groups of health care providers--think hospitals, physician practices, and other care organizers like insurers--that work together to coordinate the care patients receive with the goals of improving care quality while reducing cost and strengthening patients' health.  The idea is that in today's health care system, care is poorly coordinated--no one physician, hospital, or payer is solely responsible for all the care an individual receives, so there are gaps in care, duplication, waste, and a general lack of accountability.  Moreover, fee-for-service payments encourage each care provider to increase volume rather than provide high-value care.  An accountable care organization, though, is intended to be accountable for individuals' overall health and all the care they receive.  By holding these organizations accountable for delivering quality care, the ACA envisions patients will achieve better health outcomes at lower cost.    

The ACA puts ACOs to use in two ways--through a shared savings program under Medicare and a demonstration project under Medicaid for children.  The Medicare shared savings program aims to give providers an incentive to participate in ACOs and provide quality care:  any reductions in spending on patients attributed to an ACO are to be shared between Medicare and the providers.  The Medicaid demonstration will likely have similar goals.  Moreover, even outside of the ACA, many states are looking to payment reforms as a way to contain costs in Medicaid.   

HHS recently released a proposed rule that outlines how the Medicare shared savings program will work.  Since the ACA ties the Medicaid pediatric ACO demonstration rules to their counterparts under the Medicare ACO program, the proposed rules provide a strong clue on how the Medicaid demonstration will work.  However, we're still waiting for HHS to formally announce the Medicaid demonstration project that the ACA says must begin on January 1, 2012 and end by December 31, 2016. 

Judging from the proposed Medicare rules, ACOs will be expected to take on some portion of risk for the cost of the care they provide--they will share in savings but also be partially responsible if costs exceed expectations.  ACOs may choose to put off downside risk for two years (while remaining eligible for some shared savings), but by their third year of participation all ACOs must take on some risk.  Another key point is that attributing patients to an ACO will be done retrospectively.  Rather than patients "enrolling" in an ACO, CMS will look at the providers that an individual uses over the course of a year and attribute them to an ACO if most of their care came from participating providers.  This allows patients to retain the choice of providers that has been an important part of Medicare--one question is whether this freedom will also apply in the demonstration under Medicaid, which has a stronger history of using managed care networks.  In fact, a range of other questions about how the Medicaid demonstration project will work has been posed by the Health Reform GPS brief on the project.

The proposed Medicare rules are an important guide, but the pediatric demonstration and other efforts to use ACOs in Medicaid will depend strongly on the choices that state officials make.  Has your state acted to pursue ACOs in Medicaid?  Let us know by posting a comment!